Nexus Energy (NXS)

Macquarie has upgraded its rating on oil and gas explorer
Nexus Energy
to “outperform" on promising prospects from its Crux liquefied natural gas project.

There are challenges ahead for the company, including a $1 billion funding gap, which the company is currently trying to fill. An existing gas project, Longtom, is also at risk of an output downgrade. The broker has revised down its forecast earnings for the 2011 financial year to a $29 million loss.

Despite these concerns the broker believes the current 31¢ share price is not sufficiently taking into account the chance of the Crux project succeeding, and thus has potential upside. Macquarie has a 12-month target price of 50¢ on the stock.